Thats right.

B and E are very close.


But would go for the B.

Because in E , <that> refers to the areas and not the temperate areas

Typical Tense mismatch error. The question misguides the testaker to think it involves 2 events. In effect there is only 1 past event. The presence of ' in 1837' might confuse the readers into thinking that there are 2 past events.
clue: Look at the word- studies. its in present tense.
so in effect we are not talking about 2 past events. That points out the error in A.

A) in which great ice sheets had existed in now currently temperate areas (unnecessary use of past perfect)

B)in which great ice sheets existed in what are now temperate areas (correct. all modifiers placed correctly. People would try to eliminate in terms of 'in which' or 'when'. Trust me, Gmat will not set any question based on testing the concept of 'in which' or ' when'. There needs to be some other better nuance involved. so dont bother if you cannot decide between the two. look for another error that is bound to be present)

C)when great ice sheets existed where there were areas now temperate - temperate is an adjective of areas and needs to be as close to it as possible. It changes the meaning of the sentence. implies that ice sheets existed where there were areas. that is wrong. ice sheets existed in areas that are now temperate areas.

D)when great ice sheets had existed in current temperate areas ( improper use of past perfect)

E)when great ice sheets existed in areas that are now temperate (temperate is an adjective and needs to be placed near 'areas' . temperate areas is clearly preferred over 'areas that are now temperate')

Thanks Guys...

OA : B